Organizing 1

Copyright © 2013 by McGraw Hill Education (India) Private Limited. All rights reserved.
Chapter
Chapter88
LEARNING OBJECTIVES
 Identify the basic patterns of traditional
departmentation and their advantages and
disadvantages
 Analyze matrix organizations
 Explain strategic business units
 Examine organization structures for global
enterprises
 Understand the virtual and boundaryless
organizations
 Recognize that there is no single best pattern of
departmentation
LINE-AND-STAFF AUTHORITY
• LINE AUTHORITY. • Staff Authority
• Line authority flows down the Staff authority is the right to advise
chain of command. or counsel those with line
• For example, line authority gives a authority. For example, human
production supervisor the right to resource department employees
direct an employee to operate a help other departments by
particular machine. selecting and developing a
• Therefore, line authority gives an qualified workforce.
individual a certain degree of power
Copyright © 2010 , by Weihrich & Cannice

Management 13th ed. 3
Line Organisational structure

Departmentalization
• Functional Approach
• Divisional Approach
• Matrix Approach
• Team Approach
• The Virtual Network Approach
Copyright © 2010 , by Weihrich & Cannice

Management 13th ed. 6
DEPARTMENTATION BY ENTERPRISE
FUNCTION
Grouping of activities according to the

functions of an enterprise, such as production,
sales, and financing.
(IN A MANUFACTURING COMPANY)

A FUNCTIONAL ORGANIZATION GROUPING
A FUNCTIONAL ORGANIZATION GROUPING
ADVANTAGES & DISADVANTAGES
DEPARTMENTATION BY
TERRITORY OR GEOGRAPHY
Grouping of activities by area or territory is

common in enterprises operating over wide
geographic areas.

A TERRITORIAL, OR GEOGRAPHIC ORGANIZATION GROUPING
A TERRITORIAL, OR GEOGRAPHIC ORGANIZATION GROUPING
DEPARTMENTATION BY
CUSTOMER GROUP
Grouping of activities that reflects a

primary interest in customers.
CUSTOMER DEPARTMENTATION (IN A LARGE BANK)

DEPARTMENTATION BY PRODUCT
Grouping of activities according to

products or product lines, especially in

multiline, large enterprises.

A PRODUCT ORGANIZATION GROUPING

A PRODUCT ORGANIZATION GROUPING
MATRIX ORGANIZATION
The combining of functional and project or

product patterns of departmentation in the
same organization structure.
MATRIX ORGANIZATION (IN ENGINEERING)

(IN ENGINEERING)
MATRIX ORGANIZATION

GUIDELINES FOR MAKING MATRIX
MANAGEMENT EFFECTIVE
• Define the objectives of the project or task.
• Clarify the roles, authority, and responsibilities of managers

and team members.
• Ensure that influence is based on knowledge and
information, rather than on rank.
• Balance the power of functional and project managers.
• Select an experienced manager for the project who can
provide leadership.
• Undertake organization and team development.
• Install appropriate cost, time, and quality controls that
report deviations from standards in a timely manner.
• Reward project managers and team members fairly.
STRATEGIC BUSINESS UNITS (SBUS)
Distinct businesses set up as units in a larger

company to ensure that certain products or
product lines are promoted and handled as though
each were an independent business.
(IN A LARGE INDUSTRIAL CHEMICAL COMPANY)

TYPICAL STRATEGIC BUSINESS UNIT ORGANIZATION
CORE COMPETENCY
Collective learning, coordination, and

integration of skills to obtain “streams of

technology.”
ORGANIZATION STRUCTURES FOR THE
GLOBAL ENVIRONMENT
• Organization structures differ greatly for

enterprises operating in the global
environment.
• The kind of structure depends on a variety
of factors, such as the degree of
international orientation and commitment.
THE VIRTUAL ORGANIZATION
• A rather loose concept of a group of

independent firms or people that are

connected often through information
technology.
• These firms may be suppliers, customers,
and even competing companies.
BOUNDARYLESS ORGANIZATION
• Jack Welch, former CEO at GE (General

Electric), stated his vision for the company as

a boundaryless company, an “open, anti-
parochial environment, friendly toward the
seeking and sharing of new ideas, regardless
of their origin.”
• The purpose was to remove barriers between
the various departments as well as between
domestic and international operations.
CHOOSING THE PATTERN OF
DEPARTMENTATION
• There is no one best way of departmentation that

is applicable to all organizations and all situations.

• Managers must determine what is best by looking
at the situation they face.
– The jobs to be done and the way they should be done
– The people involved and their personalities
– The technology employed in the department
– The users being served
– Other internal and external environmental factors in
the situation
THE AIM
ACHIEVING OBJECTIVES
• Departmentation is not an end in itself, but
is simply a method of arranging activities to

facilitate the accomplishment of objectives.
• Each method has its advantages and
disadvantages.
• The process of selection involves a
consideration of the relative advantages of
each pattern at each level in the
organization structure.
MIXING TYPES OF DEPARTMENTATION
• The objective of departmentation is not to

build a rigid structure, balanced in terms

of levels and characterized by consistency
and identical bases, but to group activities
in the manner that will best contribute to
achieving enterprise objectives.
• If a variety of bases does this, there is no
reason why managers should not take
advantage of the alternatives before them.
CORPORATE VENTURE CAPITAL
Some firms that are faced with shortening

product life cycles and the need for rapid

innovation create internal venture capital
divisions. These divisions seek out smaller
technology firms in which to make an
investment. These investments may give
new insight or access to newly emerging
technologies.
KEY IDEAS AND CONCEPTS
FOR REVIEW
• Departmentation by enterprise function
• Departmentation by territory or geography

• Departmentation by customer group
• Departmentation by product
• Matrix organization (or grid, or project, or
product)
• Strategic business unit
• Organization structures for global enterprises
• Virtual organization
• Boundaryless organization

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Copyright © 2013 by McGraw Hill Education (India) Private Limited. All rights reserved.

Copyright © 2010 , by Weihrich & Cannice

Line Organisational structure

Copyright © 2010 , by Weihrich & Cannice

Grouping of activities according to the

(IN A MANUFACTURING COMPANY)

Grouping of activities by area or territory is

(IN A MANUFACTURING COMPANY)

Grouping of activities that reflects a

CUSTOMER DEPARTMENTATION (IN A LARGE BANK)

Grouping of activities according to

products or product lines, especially in

(IN A MANUFACTURING COMPANY)

ADVANTAGES & DISADVANTAGES

The combining of functional and project or

MATRIX ORGANIZATION (IN ENGINEERING)

ADVANTAGES & DISADVANTAGES

• Clarify the roles, authority, and responsibilities of managers

Distinct businesses set up as units in a larger

(IN A LARGE INDUSTRIAL CHEMICAL COMPANY)

Collective learning, coordination, and

integration of skills to obtain “streams of

• Organization structures differ greatly for

• A rather loose concept of a group of

independent firms or people that are

• Jack Welch, former CEO at GE (General

Electric), stated his vision for the company as

• There is no one best way of departmentation that

is applicable to all organizations and all situations.

is simply a method of arranging activities to

• The objective of departmentation is not to

build a rigid structure, balanced in terms

Some firms that are faced with shortening

product life cycles and the need for rapid

• Departmentation by territory or geography

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